Illiquid Debt and Equity Investing: Could the answer lie in 'Long Power'?

As the demand for stable, cashflow generating senior debt and equity assets continues unabated, there's been a corresponding narrowing of the spreads generated by those hard-to-identify and harder-still-to-buy illiquid assets. There's a sense that, in the UK at least, many of the most palatable categories for institutional investors, such as student accommodation blocks or healthcare derived assets have been bought, booked and (sometimes) securitised. Insurance investors have been particularly impacted, as they find themselves competing with private investors in a crowded room, for assets with a sometimes mediocre long term yields.

This has resulted in a thirst for new asset categories and some pretty impressive innovations in both underlying assets and their investment structures. But an increasing supply of such investments may have been rather closer to home all along: There's a growing belief that institutional investors have yet to fully exploit a forthcoming wave of market based, often ESG friendly solutions in the non-coal power sector. These range from wholesale LNG distribution networks through to business-to-consumer opportunities and new investments in power generation and distribution as subsidised projects recede. Private Equity Wire takes up the story...

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Renewables and natural gas replacing coal and nuclear to power industry, transportation and homes is arguably one of the most important structural transformations in global energy infrastructure.
This is being driven by government policies and increased awareness among institutional investors for sustainable and environmentally friendly investments. Within the infrastructure space, that means reducing reliance on coal fired power stations, continued decommissioning of nuclear power stations, and a further commitment to investing in renewable energy sources.
With the significant cost decreases of renewables combined with the globalisation of natural gas, the economics are looking highly favourable for long-term infrastructure investors: according to the International Energy Agency (IEA), for solar photovoltaic projects there was a 73 per cent decrease in LCOE, or levelized cost of electricity, between 2010 and 2017.